Development of diabetes generally reflects an inadequate mass of insulin-producing beta-cells. beta-cell proliferation and differentiation are regulated by a variety of growth factors and hormones, including insulin-like growth factor I (IGF-I). GRF1 is a Ras-guanine nucleotide exchange factor known previously for its restricted expression in brain and its role in learning and memory. Here we demonstrate that GRF1 is also expressed in pancreatic islets. Interestingly, our GRF1-deficient mice exhibit reduced body weight, hypoinsulinemia and glucose intolerance owing to a reduction of beta-cells. Whereas insulin resistance is not detected in peripheral tissues, GRF1 knockout mice are leaner due to increased lipid catabolism. The reduction in circulating insulin does not reflect defective glucose sensing or insulin production but results from impaired beta-cell proliferation and reduced neogenesis. IGF-I treatment of isolated islets from GRF1 knockouts fails to activate critical downstream signals such as Akt and Erk. The observed phenotype is similar to manifestations of preclinical type 2 diabetes. Thus, our observations demonstrate a novel and specific role for Ras-GRF1 pathways in the development and maintenance of normal beta-cell number and function.